Falling valuations may also catch the attention of institutional backers, whose portfolio managers may have overpaid for deals in recent years owing to a frothy market — and who can, for the time being at least, get much better deals on talented teams.
“As a fund, if you have dry powder, now is the time to deploy because the best historical vintages in venture have come from periods after a valuation reset,” Choo said via email.
“Some forward-thinking LP’s are also looking at these same historical trends, in conjunction with the wider macro (strong public market performance, calls for a soft-landing, etc.), which may drive renewed interest next year.”